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The fellows over at The Situationist blog have found another interesting read (via Seed Magazine). This article is about honesty & whether being honest is a conscious decision.

I think the scientists behind these experiments need to add more participants to future studies. I suggest the following  opposing participants; Buffett & Madoff.

Click Here To Read The Full Article &  Learn About Honesty & Decision Making

Introduction (Via Seed Magazine & Situationist)

In a famous set of experiments in the 1970s, children were observed trick-or-treating in the suburbs. Some were asked their names and addresses upon arriving at a door, while some were asked nothing. All were instructed to take just one piece of candy from the bowl, but as soon as the owner of the home retreated into the kitchen, the children who hadn’t provided their names and addresses shoveled the candy into their bags, sometimes taking everything in the bowl. Psychologists posited that anonymity made the children feel safe from the repercussions of their actions, an effect they call deindividuation.

Key Issue (Via Seed Magazine & Situationist):

Greene and Paxton have just published a study in the Proceedings of the National Academy of Sciences that attempts to get at the subconscious underpinnings of morality by recording subjects’ brain activity as they make a decision to lie. Under the fMRI, subjects were asked to predict the result of a coin toss and were allowed to keep their predictions to themselves until after the coin fell, giving them a chance to lie. As motivation, they were paid for correct predictions. For comparison, the researchers ran tests in which they asked subjects to reveal their predictions before the coin toss. The scientists then analyzed the subjects’ success rates using statistics: The dishonest were identified as those who guessed the results of the coin toss more times than chance would dictate.

Greene and Paxton had hypothesized that if deciding to be honest is a conscious process—the result of resisting temptation—the areas of the brain associated with self-control and critical thinking would light up when subjects told the truth. If it is automatic, those areas would remain dark.

What they found is that honesty is an automatic process—but only for some people. Comparing scans from tests with and without the opportunity to cheat, the scientists found that for honest subjects, deciding to be honest took no extra brain activity. But for others, the dishonest group, both deciding to lie and deciding to tell the truth required extra activity in the areas of the brain associated with critical thinking and self-control.

Additional Excerpt (Via Seed Magazine)

Their findings—that honesty is automatic for some people—is part of a growing body of work that shows that many, if not most, of our daily actions are not under our conscious control. According to John Bargh, a Yale social psychologist who studies automaticity, even our higher mental processes, ranging from persistence at an activity to social stereotyping to stopping to help a person in need, are performed unconsciously in response to environmental cues. And Jon Haidt of the University of Virginia has found through numerous studies that we make some moral judgments, like those involved in the trolley problem, based entirely on our emotions and are unable to explain logically why some things are right and others wrong.

Click Here To Read The Full Article &  Learn About Honesty & Decision Making

Interesting paper on the trade offs between accuracy and precision in modeling (think excel)!

Click Here To Download Less Is More: Accuracy vs Prediction In Modeling

Introduction (By Susan Bachman, Coral Pipeline, & Marry Goodreau Stoner Associates Inc)

As computers have increased in speed and capacity, pipeline modeling software has kept pace. Modelers can simulate larger networks, and work on local personal computers instead of timeshare systems. Now, modelers can construct larger, more complex, more detailed, and precise models. Many modelers assume that building with more precision yields a more accurate model. Is this really true? Are these models any more accurate than the less detailed models of previous decades? Does the added precision (detail) improve hydraulic calculations? Could additional precision make the modeling process more difficult? What is the necessary level of detail?

Click Here To Download Less Is More: Accuracy vs Prediction In Modeling

A nice fellow implores the Australian Government to use “nudge” oriented reforms.

Click Here To Read: Give Reform A Bit Of A Nudge (a la Thaler)

Excerpt (Via Andrew Leigh)

In Nudge: Improving Decisions About Health, Wealth and Happiness, Chicago University academics Richard Thaler and Cass Sunstein argue that economists and politicians have overestimated the attention that citizens devote to decision-making. Rather than assuming that people have the time of a monk and the skills of an actuary, it might be better to craft policies for busy lives. Or to put it another way, the representative citizen is closer to Homer Simpson than to HAL.

One set of Nudge reforms aim to improve default options. In the political arena, wars have been waged over optional versus compulsory systems. Yet in many choice regimes, people simply stick with the default option. Getting defaults right can make a big difference to people’s lives.

The best known application of this kind of ‘behavioural economics’ research is in the area of savings. Recognising that the typical person under-saves for retirement, Australia introduced compulsory superannuation in 1992, and steadily increased the compulsory contribution. But for all the talk of superannuation choice, the vast majority of us are in the default fund chosen by our employer and the default plan chosen by that fund.

Changing defaults, improving information, and making government more effective are all part of what Thaler and Sunstein have tagged ‘libertarian paternalism’. Unlike most government programs, these reforms aim to improve wellbeing without constraining choice. Perhaps our cash-constrained governments could be nudged into checking them out?

Click Here To Read: Give Reform A Bit Of A Nudge (a la Thaler)

I wonder what Buffett would think about this….Makes me think of the Ovarian Lottery

Click Here For An Expanded Version of 5 Myths About Our Land Of Opportunity

Introduction (Via Brookings)
Americans have always believed that their country is unique in providing the opportunity to get ahead. Just combine hard work with a bit of talent and you’ll climb the ladder—or so we’ve told ourselves for generations. But rising unemployment and financial turmoil are puncturing that self-image. The reality of this “land of opportunity” is considerably more complex than the myths would suggest:

Excerpt (Via Brookings)

1. Americans enjoy more economic opportunity than people in other countries.

Actually, some other advanced economies offer more opportunity than ours does. For example, recent research shows that in the Nordic countries and in the United Kingdom, children born into a lower-income family have a greater chance than those in the United States of forming a substantially higher-income family by the time they’re adults.

2. In the United States, each generation does better than the past one.

As a result of economic growth, each generation can usually count on having a higher income, in inflation-adjusted dollars, than the previous one. For example, men born in the 1960s were earning more in the 1990s than their fathers’ generation did at a similar age, and their families’ incomes were higher as well. But that kind of steady progress appears to have stalled. Today, men in their 30s earn 12 percent less than the previous generation did at the same age.

3. Immigrant workers and the offshoring of jobs drive poverty and inequality in the United States.

Although immigration and trade are often blamed, a more important reason for our lack of progress against poverty and our growing inequality is a dramatic change in American family life. Almost 30 percent of children now live in single-parent families, up from 12 percent in 1968. Since poverty rates in single-parent households are roughly five times as high as in two-parent households, this shift has helped keep the poverty rate up; it climbed to 13.2 percent last year. If we had the same fraction of single-parent families today as we had in 1970, the child poverty rate would probably be about 30 percent lower than it is today.

4. If we want to increase opportunities for children, we should give their families more income.

Of course money is a factor in upward mobility, but it isn’t the only one; it may not even be the most important. Our research shows that if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children. If you do all three, your chances of being poor fall from 12 percent to 2 percent, and your chances of joining the middle class or above rise from 56 to 74 percent. (We define middle class as having an income of at least $50,000 a year for a family of three.)

5. We can fund new programs to boost opportunity by cutting waste and abuse in the federal budget.

Can we cut enough ineffective programs or impose enough new taxes to put better teachers in classrooms, expand child-care assistance for working families and provide more financial aid to disadvantaged students while reducing projected deficits? The answer is a resounding no. Certainly, we should eliminate fraud, waste and abuse; raise new revenues; and scrub the budget for additional savings. But these alone won’t get the job done. Just three rapidly growing programs – Medicare, Social Security and Medicaid – along with interest on the debt threaten to crowd out all other spending in a few decades.

Click Here For An Expanded Version of 5 Myths About Our Land Of Opportunity

A big thanks to Guru Focus & My Investing Notebook for finding this.